RE: Do I need an app for modern ui
Hello,
Yes, we advise to either use out-of-the-box apps (e.g. the Sales Hub app) or to create your own new model-driven apps.
If you just enable the "Use Unified Interface only" setting on your environment, the "Dynamics 365 - Custom app" will just be the rendering of your legacy "monolithic" CRM application with the Unified Interface engine, but that's just some sort of compatibility mode rendering, and this will display a warning. It's not embracing the concept of model-driven apps and this isn't ideal at all.
Once you have transitioned to Unified Interface with model-driven apps, you can then enable the "Use Unified Interface only" setting here: https://docs.microsoft.com/en-us/power-platform/admin/settings-behavior#settings and also disable "Show legacy app to everyone, not just admin", so that your users don't see the legacy app anymore.
You will find more useful resources in the Unified Interface Playbook.
Chapter 3 "Transition" contains specific content on how to define your app strategy: https://docs.microsoft.com/en-us/powerapps/maker/model-driven-apps/unified-interface-playbook
Henry